Stocks Pull Back After 4 Weeks of Gains; Yahoo Slips

Traders work on the floor of the New York Stock Exchange on Monday. (Reuters/Brendan McDermid)
Traders work on the floor of the New York Stock Exchange on Monday. (Reuters/Brendan McDermid)

NEW YORK (AP) — Stocks were pulling back in midday trading Monday as investors took a break after four weeks of gains that brought the market to record highs. Yahoo fell after Verizon Communications announced it would buy most of Yahoo’s internet businesses for $4.83 billion.

KEEPING SCORE: The Dow Jones Industrial Average lost 117 points, or 0.6 percent, to 18,453 as of 12:50 p.m. Eastern. The Standard & Poor’s 500 index lost 13 points, or 0.6 percent, to 2,162 and the Nasdaq composite lost 16 points, or 0.3 percent, to 5,084.

YAHOO’S DEMISE: Yahoo fell $1.04, or 2.6 percent, to $38.33 after the company announced that Verizon would buy Yahoo’s advertising, media and email businesses for $4.83 billion, ending a five-month auction. Verizon will add Yahoo to its portfolio of recently purchased media companies, including AOL.

Once finished, Yahoo will be a shell of its former self, existing mainly as a holding company for its Alibaba and Yahoo Japan investments, as well as its patent portfolio.

Verizon shares fell 45 cents, or 1 percent, to $55.65.

TAKING A BREAK: It’s quite common for a market that has run up so far so fast to retreat. With the slow summer trading season and lack of economic news, traders say there are few reasons to be buying the market right now.

“This is a broad, but benign, sell-off,” said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.

Larson pointed out the recent price-to-earnings ratio on the S&P 500, or the amount of money that investors are paying for each dollar of earnings, which was trading at nearly 20. That’s far above the typically 14-16 times that investors are typically comfortable with.

“It’s another reason why the market looks fatigued at the moment,” he said.

ACCELERATING: Sprint jumped $1.07, or 23 percent, to $5.69 after the company reported a wider-than-expected loss but added a larger number of subscribers than expected. Japan’s Softbank purchased a controlling stake in Sprint nearly three years ago.

CENTRAL BANKS: The Bank of Japan and Federal Reserve hold policy meetings this week. With Japan’s economy barely growing, economists are speculating about whether its central bank may push more stimulus, likely lowering its interest rate further into negative territory.

The U.S. economy is in better shape than other advanced economies, but expectations are that the Fed will hold interest rates steady and look to raise interest rates later this year. Securities that bet on which way the Fed will move interest rates show only a 10 percent chance of a rate increase this week.

ENERGY: Oil prices continued on their month-long slide, with the price of U.S. crude falling $1.11 to $43.08 a barrel. Brent crude, the global benchmark, slipped $1.08 to $44.61 a barrel in London.

The 2 percent drop in oil prices dragged down major energy companies. Chevron lost $2.49, or 2.5 percent, to $103.17 and Exxon Mobil gave up $1.69, or 1.8 percent, to $92.32, the two biggest drops in the Dow Jones industrial average.

Oil prices are down nearly 12 percent this month.

BONDS, CURRENCIES: U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 1.56 percent from 1.57 percent. The dollar fell to 106.04 yen from 106.17 yen. The euro rose to $1.0978 from $1.0961.

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